Shell faces new probe over Alaska drill program

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Published March 28, 2013

| Reuters

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ANCHORAGE – A fourth government probe is under way into Royal Dutch Shell's mishap-prone 2012 Alaska drilling season, this time for possible violations of international marine environmental rules, a U.S. Coast Guard official said on Wednesday.

The Coast Guard has asked federal prosecutors to consider taking action on possible violations of the International Convention for the Prevention of Pollution from Ships (MARPOL) committed in the operations of Shell's Kulluk drillship, said Rear Admiral Thomas Ostebo, head of the Coast Guard in Alaska.

Shell, which had planned to drill up to five wells offshore Alaska in 2012 and a similar number this year, has previously said it will pause its Alaska operations to regroup due to complications faced in the harsh northern environment, but it expects to resume drilling next year.

Ostebo said he had commissioned one investigation already launched into the December 31 grounding of the Kulluk and that the Coast Guard has forwarded findings of safety and environmental violations on the Noble Discoverer, Shell's other Alaska drillship, to U.S. prosecutors for possible enforcement action.

"Last week, I also referred a separate Kulluk investigation into potential MARPOL violations from 2012 to the Department of Justice for their review and potential follow-on action," Ostebo said at a field hearing convened by Senator Mark Begich.

Ostebo declined to comment further, with the review pending.

Shell's 2012 drill season had earlier been the subject of a 60-day review by the U.S. Department of Interior that concluded Shell was ill-prepared for Alaska's marine rigors, had not adequately overseen contractors and had committed other lapses.

Pete Slaiby, Shell's vice president for Alaska operations, declined at the hearing to speak about the investigations. He did note that drilling operations - the first in open waters in Alaska's Arctic in 15 years - were completed safely.

Shell had been planning last year to drill up to two wells in the Beaufort Sea, off northern Alaska, and up to three wells in the more remote Chukchi Sea, off northwestern Alaska.

But with equipment failures, permitting problems and sea-ice complications, Shell was only able to drill the top portions of one well in the Chukchi and one well in the Beaufort during the fall open-water season. It then moved its drillships and support vessels out of the Arctic.

The Kulluk, after escaping tow lines crossing the stormy Gulf of Alaska, grounded south of Kodiak Island on December 31. A week later, it was refloated and towed to a nearby bay.

The ship on Wednesday began its voyage to a Singapore shipyard for repairs, Shell spokesman Curtis Smith said.

With two rigs out of service, Shell last month said it will pause its Alaska drilling operations in 2013.

It still expects to resume drilling in 2014, and may be joined in the Chukchi Sea by ConocoPhillips, which holds extensive leases in the basin.

Tommy Beaudreau, deputy Interior secretary and director of the Bureau of Ocean Energy Management, said ConocoPhillips could face different rules than those imposed on Shell.

Conoco plans to drill from a jackup rig rather than a floating drillship, so safety issues might be different from those with Shell, though regulators plan to be just as strict about the potential for loss of well control, Beaudreau said.

Control at the source is critical in the Arctic because of geographic remoteness, isolation, and sea ice, he said.

"We don't prescribe a one-size-fits-all solution to this issue. But we will be very demanding on this issue," said Beaudreau, who testified by teleconference.

Regulators required Shell to have a special barge with an oil-containment dome to respond to any blowouts. Shell was unable to get the dome and barge working right for 2012, so it was not allowed to drill into hydrocarbon-bearing zones.